Earnings Call: Q4 2017

Jan 30, 2018

You, and good morning, ladies and gentlemen. Welcome to Philips' 4th Quarter and Fiscal Year 2017 Results Conference Call. I'm here with our CEO, Frans van Houten and our CFO, Abhijit Batasharia. On today's call, Frans will take you through our strategic and financial highlights for the period. Abhijit will then provide more detail on the financial performance and market dynamics. After that, we will take your questions. Our press release and related information slide deck were published at 7 am this morning. Both documents are now available for download from our Investor Relations website. A full transcript of this conference call will be made available by end of today on our website. Before I turn over the call to Frans, I would like to remind you that Philips' shareholding in Philips Lighting is currently 29% of Phillips Lighting's issued share capital. As a result, Phillips no longer has control over Phillips Lighting and has ceased to consolidate Phillips Lighting under IFRS. The remaining Phillips Lighting stake is presented as an investment included in assets classified as held for sale in the financial statements of Royal Philips as from the end of November 2017. Finally, as mentioned in the press release, adjusted EBITDA is defined as income from operation, excluding amortization of acquired intangible assets, impairments of goodwill and other intangible assets, restructuring charges, acquisition related costs and other significant items. Comparable growth for sales and orders are adjusted for currency and portfolio changes. With that, I would like to hand over to Frans. Yes. Thanks, Pim, and thank you all for joining us today. 2017 was a good year as we continued the transformation of Philips into a focused leader in Health technology, and we achieved our improvement targets in a challenging year. For this, I would like to thank our customers, employees and other stakeholders for their trust and hard work. I'm pleased that we delivered full year 4% comparable sales growth and adjusted EBITA margin increase of 110 basis points and a strong €1,200,000,000 free cash flow. We also ended the year with a strong order book driven by a 6% comparable order intake growth for the whole year. As Philips gained momentum through the year, we were able to deliver operational improvements and increased profitability. We finished the 4th quarter on a firm note by delivering a comparable order intake growth of 7% and a comparable sales growth of 5%. We achieved a strong 140 basis points increase in adjusted EBITDA margin to 16.7% for the quarter and an increased free cash flow to €948,000,000 During 2017, we executed on important milestones of our strategic road map, and I would like to highlight some before going into more specifics for the quarter. On June 30, we announced the completion of the sale of an 80 percent stake in the combined Lumilets and Automotive business. With the completion of that transaction and the deconsolidation of Philips Lighting in the Q4, we reached an important milestone in transforming Philips into a focused health technology company. Secondly, we introduced many breakthrough innovations, which supported our strong order intake for the year. The sizable number of new product introductions resulted in over 60% of our diagnosis and treatment portfolio being renewed. This will enable further market share growth and profitability improvements. Our focus on innovation is also recognized in the industry. For the 5th consecutive time, Philips has been named a top 100 global innovator by Clarivate Analytics. We are also among the top 50 global innovators of the year according to the Boston Consulting Group Worldwide Survey published recently. In the Q3, we strengthened the leadership position of our image guided therapy business by expanding our portfolio of therapy devices with the acquisition of SpectroNetX. SpectroNetix has an impressive product portfolio of catheters for the treatment of coronary artery disease and peripheral vascular disease. The business reached an important milestone in the Q4 as we launched the sales of Stellarex, the next generation drug coated balloon, to treat patients with peripheral arterial disease after receiving FDA approval. SpectroNetic's highly complementary portfolio builds on Philips' leadership position in image guided therapy devices. Our self help productivity program continues to be an important margin contributor. For the 3 year period 2017 to 2019, we have committed a cumulative total net saving of €1,200,000,000 averaging productivity savings of approximately €400,000,000 per year. For the 1st full year, Philips productivity programs delivered annual savings of €483,000,000 well on track to deliver the targeted savings for the 3 year program. With these moves, we are well positioned to capture the tremendous opportunities that we see in the HealthTech domain. I'm also pleased that during last year, MSCI acknowledged our transformation into a focused health technology leader by reclassifying Philips stock to the health care sector from the Industrials Group. And that followed, of course, the reclassification by the FTSE Group's ICB and the change Health Care. As outlined at our Capital Markets Day last November in New York, our HealthTech value creation story is built on 3 key levers on which we made further progress in the 4th quarter. The first lever, by creating value in our core businesses, by gaining market share through deeper and more comprehensive customer partnerships, innovative solutions and pursuing growth by increasing geographic coverage. The second lever, by creating value in adjacencies through both organic investments, partnerships and selective M and A and the third lever, by improving margins through customer and operational excellence. On the first lever, innovation and partnerships and increased geographic coverage were important drivers of the continued growth of our 6% in Personal Health business in the 4th quarter. Also in the Diagnosis and Treatment businesses, we gained further momentum with the double digit comparable order intake growth and 6% comparable sales growth. We had very successful engagement at the Radiology Society of North America, the RSNA, trade show in November. We showcased our new portfolio of digital imaging systems, smart devices, advanced informatics and services. Our artificial intelligence driven solutions and connected technologies were very well received by our customers. We launched our new digital MR Prodiva 1.5 Tesla system, which provides enhanced clinical performance and increased productivity. We also introduced the latest configuration of our Icon Spectral CT, which is optimized to support the needs of emergency and oncology care. Moreover, since the Q3, we have been shipping Varios, the world's first and only fully digital PETCT system, which is achieving market success due to its superb resolution, accuracy and efficiency. Recent results of an independent study demonstrated the clinical workflow and productivity benefits of Philips Azurion, which was introduced to the market during the Q1 of 2017. The data showed that the clinicians' use of Azurion resulted in a significant reduction of the in lab patient preparation time, the interventional procedure time and the post procedure lab time. Azurion was very well received in the market and contributed to the high single digit order intake growth for image guided therapy in 2017. We also launched Philips IntelliSpace Enterprise Edition for Radiology, a full suite of interoperable health care informatics solutions for data workflow and visualization. Moreover, we launched our next generation patient monitoring solution in the United States. This enterprise wide system consists of bedside, transport, mobile and central station monitoring technology. It features the IntelliView X3, which provides continuous monitoring for the most critical patients during in hospital transport. The new offering includes a range of product support and expert services. In the Q3 of 2017, we expanded our market leading home ventilation offering with the launch of the wirelessly connected Trilogy ventilator in North America, linking it to the cloud based platform Care Orchestrator, which is powered by the Philips HealthSuite digital platform. This established a clinically validated solution for COPD management, which will help providers lower care costs, reduce hospital admissions while improving patient experience. Now with Connected Respiratory Care added to our 2,600,000,000 nights of sleep experience, Philips is leading connected sleep and respiratory therapies in the home. The award winning Trilogy ventilator as well as our compact sleep therapy system, the DreamStation Go, launched in the Q2 of last year, contributed to a double digit comparable growth in sleep and respiratory devices for the Q4. Our sleep and diagnostics business also experienced mid teens growth, validating our intent to expand the sleep apnea market worldwide. And in patient interface, we have exciting launches planned in the first half of twenty eighteen, addressing the full mask face mask segment, which is the largest segment of the market. During the quarter, we signed several multiyear agreements, including a 10 year agreement with the Children's Hospital and Medical Center of Omaha in the United States to help drive innovation in pediatric care. We also won a multimodality tender at the University Hospital of Sleswig Holstein in Germany to provide medical equipment for the hospital's radiology and neuroradiology departments. Now moving to our Oral Healthcare business. In Europe, Philips partnered with Dutch health insurer, ONVZ, to provide an industry first collaboration focused on oral care prevention. Their first offering is a supplementary health insurance in combination with Philips' latest connected electronic toothbrush to protect against cavities, gum inflammation and oral disease. The insurance fully covers dental hygienist visits and dentist checkups and includes a new brush head every quarter as a subscription. We continue to deliver strong growth in China driven by our innovative consumer health and professional health care portfolio, focused initiatives to step up market share and customer partnerships. For example, Philips partnered with Oranger, a service provider specialized in chronic respiratory disease management and Health100, the largest health examination organization in China, to provide integrated solutions for chronic respiratory disease that cover screening, referral, treatment and recovery. We are pleased with the continued success of OneBlade, the innovative new product that taps into the growing market trend of male facial hair styling. OneBlade effectively broadens the reach of our male grooming portfolio. Leveraging our capabilities as the world's leading electric male grooming brand, OneBlade generated annual sales of more than €100,000,000 within 18 months of its launch and is currently available in over 20 countries. On the second lever of creating value and adjacencies through organic investments in new business, partnerships and selective M and A, we further complemented our portfolio as we partnered with the U. S.-based Nuance to bring artificial intelligence into radiology reporting by leveraging functionalities from Philips Illumio and Nuance PowerScribe 360. We also teamed up with leading telehealth provider American Well to jointly deliver virtual care solutions around the world by embedding American Well's mobile telehealth services into an array of Philips solutions spanning personal health and wellness, population health management and clinical programs. The first deployment is on the Philips Event You Grow Parenting platform, giving parents instant access to professional medical support and instant peace of mind. Beginning in the United States, Philips You Grow parenting app will offer video consultations with health care professionals via American Well. To strengthen our population health management business, we acquired Vital Health, whose highly complementary portfolio of advanced analytics, care coordination and patient engagement and outcome management solutions will support Philips' commitment to deliver integrated care solutions for care outside of the hospital. Since the acquisition of WellCentive in 20 16, we have been building and expanding our population health management business. Our strategy comprises of a 3 pronged approach. First, we help our customers to understand the needs of their population from a clinical, I. E, patient stratification and financial, I. E, reimbursement point of view. And then we help the patients to navigate in the care system outside of the hospital with their general practitioners, their nurses and their families. And as a third step, we activate and engage patients with our telehealth programs. We reinforced our radiology solutions offering with the acquisition of Analytical Informatics. Their suite of workflow improvement applications complements Philips' Performance Bridge practice to enable imaging departments to make data driven improvement decisions. For example, Philips and Banner Health extended their partnership include the adoption of Philips Performance Bridge practice across Banner's 28 radiology departments. I would like to highlight that the productivity improvements for SpectroNetics are ahead of plan. We successfully launched the CELRx drug coated balloon in the United States, and we are already seeing tangible cross selling results from the highly complementary Spectranetics and Volcano product portfolios. The integration of Volcano has been completed as planned. The business delivered high teens comparable sales growth in 2017 driven by the strong performance of our diagnostic catheters, and we further improved gross margins by 10 percentage points in the last 2 years. The sales growth and gross margin improvement, coupled with productivity programs, form a strong base for further structural profit expansion. Thirdly, on the 3rd lever, I mean, we created value by improving margins through customer and operational excellence. As mentioned earlier, our self help initiatives to drive €1,200,000,000 in savings for the period 2017 to 2019 are well on track as we delivered €483,000,000 savings for the year. Each of the main three programs, I. E, procurement savings, manufacturing productivity and overhead cost reduction, delivered on their milestones. On manufacturing productivity, we are focused on the regional consolidation of our manufacturing footprint and are targeting to approximately 30 production locations by 2019. I can confirm that we have already reduced 9 manufacturing locations by the end of 2017. As stated in an earlier press release, following an FDA inspection of our Cleveland facility in the Q3 of 2017, we submitted our response to the inspectional observations for review by the FDA. Last December, we had a constructive meeting with the FDA, and we will continue to drive our quality management system improvement program, providing monthly status reports to the FDA, highlighting the progress in addressing the observations. Separately, on October 31, the U. S. Federal Court formally approved the consent decree that has been agreed to by Philips and the U. S. Government. We have briefed you on this in detail in the press release and the following analyst call on October 11. We are proceeding in line with the terms of the consent decree, which include inspections by independent auditors. As planned, we have resumed shipments of our HS1 defibrillators globally as well as consumables, accessories and service parts for the whole range of defibrillators. Additionally, we have resumed shipments of our FRx and FR3 defibrillators to Japan, which is our 2nd largest market after the United States for these products, and we plan to ship to other markets outside the U. S. In the remainder of Q1 of 2018. Let me sum up. The progress on the 3 aforementioned levers have positioned us well to capture tremendous opportunities that we see in the health tech domain. And our performance in 2017 demonstrates that our strategic focus is paying off. At the World Economic Forum in Davos last week, Philips continued to play a leading role in the transition to the circular economy. For example, as part of our Healthy People Sustainable Planet strategy, we have pledged that Philips will take back all large medical equipment that our customers are using and repurpose traded in materials in a responsible way. Overall, we aim to deliver 15% of total revenues from Circular Solutions by 2020, for example, through innovative service models, smart upgrade paths and remanufacturing programs. The sessions held at the WEF with the health and health care governors community saw strong engagement on value based health care, effective preventative care and primary care capacity building for emerging markets. As an insight, it is evident that more needs to be done at an industry level to better define how we benchmark and measure outcomes for value based care. In collaboration with others, measurement and Healthcare Economics is an area that Philips will further develop in 2018. I would also like to take a moment to come back to the announcement regarding our new CEO of Phillips North America. Witte Rohe has succeeded Brent Schafer in that role. We activated our strong internal talent pipeline to promote Witteor, whose previous experience as the leader of the Latin America market for Philips Health Care and since 2014 leader of the global ultrasound business will ensure a seamless leadership transition. I want to thank Brent for his valuable contribution to Philips, and I wish him all the best in his future endeavors. We expect our markets to grow 3% to 5% on a comparable basis in 2018. Combined with our strong order book, we are confident that we will reach our midterm targets of 4% to 6% comparable sales growth and an average annual 100 basis points profit improvement in the adjusted EBITDA margin this year. Given the phasing of our order book, we expect improvements to be at the back end of the year. And with that, I'll turn the call to Abhijit, who will provide more detail on financial performance and market dynamics. Thank you, Frans, and good morning to all of you on the call and the webcast. Let me start by providing some color on the 4th quarter comparable sales growth of 5%. The growth for our 3 business segments, that is excluding the license income, was 5.4% and for the quarter and 4.3% for the year. The Personal Health Business and Diagnosis and Treatment businesses both delivered 6% comparable sales growth. In the Personal Health business, this was driven by a high single digit growth in both Health and Wellness and Sleep and Respiratory Care. In the Diagnosis and Treatment business, this was driven by high single digit growth in ultrasound and mid single digit growth in Image Guided Therapy and Diagnostic Imaging. Our Connected Care and Health Informatics businesses showed a 2% comparable sales growth after a strong 8% comparable sales growth in the 3rd quarter. We recorded 7% comparable sales increase in the growth geographies, which was largely driven by double digit growth in China, Central Eastern Europe, Middle East and Turkey and India. In the growth geographies, the Personal Health businesses recorded their 3rd successive quarter of double digit comparable sales growth. Sales in North America grew with 5% and in Western Europe by 4%, while other mature markets posted a 3% comparable sales growth mainly due to South Korea. In HealthTechOther, net sales decreased by €34,000,000 reflecting lower royalty income as we didn't reach an agreement with a particular licensee. As Frans mentioned, comparable order intake overall grew by 7%. The Diagnosis and Treatment business showed a double digit growth, where the North America and China markets were particularly strong with mid teens comparable order intake growth. The Connected Care and Health Informatics business declined low single digit as certain large orders in Health Informatics were postponed to 2018 as well as an order intake decline for our ECR business. For the full year 2017, order intake growth in Connected Care and Health Informatics businesses was low single digit, high single digit order intake growth for Diagnosis and Treatment businesses driven by ultrasound, The strategic investments in the portfolio and in the go to market that we embarked on for ultrasound in 2016 was successful as comparable sales growth improved to mid single digits and comparable order intake growth to double digits. This strengthened our leading position in the largest segment of the imaging market. In growth geographies, order intake on a comparable basis grew double digit compared to Q4 2016, mainly driven by ASEAN Pacific and Middle East and Turkey. As in the previous quarter, we continued our strong growth momentum in China driven by our innovative consumer health and professional health care portfolio and focused initiatives to step up market share and customer partnerships. Comparable order intake in North America and Western Europe posted a 2% growth for the quarter. For the full year our comparable order intake grew double digit in China driven by Diagnosis and Treatment businesses that showed mid teens comparable order intake growth. Let me now turn to the EBITA development for the group in the 4th quarter. The adjusted margin of 16.7 percent in the quarter was 140 basis points higher than the year before. This margin improvement was driven by strong margin increase of 190 basis points in Connected Care and Health Informatics, partly driven by procurement savings and other cost productivity. In Personal Health, the margin improved by 70 basis points and in Diagnosis and Treatment by 90 basis points. In both segments, this was mainly attributable to operational leverage from growth, procurement savings and cost productivity. Our strong performance in the 4th quarter is driven by higher volumes, improved operational performance and delivering on our cost productivity targets. More specifically, net overhead cost reduction amounted to €27,000,000 in non manufacturing cost. The productivity program contributed €26,000,000 to the gross margin. And procurement savings, in part driven by our Design for Excellence program, delivered €81,000,000 of bill of materials savings year on year. For the full year, productivity savings amounted to €483,000,000 And as Frans mentioned, we are well on track to achieve our 2017 to 2019 3 year target of €1,200,000,000 in net productivity savings. In HealthTechOther, the adjusted EBITA amounted to a loss of €19,000,000 The improvement of €10,000,000 compared to the Q4 of 2016 was driven by lower central costs partly offset by lower royalty income. Overall, adjusted EBITDA in the 4th quarter improved by 150 basis points to 20.2 percent of sales. And for the full year, adjusted EBITDA increased by 90 basis points to 15.9%. In the 4th quarter, the income tax expense was €237,000,000 mainly due to a onetime noncash tax charge of €72,000,000 recorded in income from continuing operations due to a value adjustments of Philips U. S. Deferred tax assets as a result of the U. S. Tax Cuts and Job Act, which was enacted in December 2017. The total impact in the tax accounts of the Philips Group was a significant one off noncash tax charge of €200,000,000 of which the aforementioned €72,000,000 was reported in income from continuing operations, €99,000,000 reported in net income from discontinued operations and €29,000,000 reported in equity. Our full year 2017 ETR came in at 25% as per our guidance during the Q3 analyst call. We were able to compensate the onetime noncash tax charge of €72,000,000 with a more favorable mix of profits and tax benefits from the recognition of deferred tax assets in Q4, which were previously unrecognized. Near term, the U. S. Tax Cuts and Job Act will have a neutral effect on the group's effective tax rate due to various offsetting factors. Overall, net financial expenses in the 4th quarter decreased by €58,000,000 year on year, mainly due to lower interest expenses on net debt as a result of the bond redemptions and dividend income related to the retained interest in the combined businesses of Lumilets and Automotive. Return on invested capital, which is calculated on a 5 quarter MAT basis, was 11.9%, which is 4.2% above our WACC. ROIC decreased by 1.3% compared to the previous quarter, mainly due to the impact of acquisitions and the onetime noncash tax charge of €72,000,000 related to the valuation adjustment of our U. S. Deferred tax assets. Our drive to increase working capital efficiencies continued to yield results as inventories as a percentage of sales continued to decrease to 13.2 percent, a year on year improvement of 120 basis points. Also, overall working capital improved by 90 basis points to 9% of sales. Free cash flow was €948,000,000 in the 4th quarter, an improvement of €397,000,000 compared to the year before. The full year free cash flow was €1,200,000,000 within our target range of €1,000,000,000 to €1,500,000,000 As we discussed during our Capital Markets Day, our dividend policy is aimed at dividend stability. As such, a proposal will be submitted to the Annual General Meeting of Shareholders be held on the 3rd May 2018 to declare a distribution of €0.80 per common share in cash or shares at the option of the shareholder. Further details can be found in our Q4 press release. During the Q4, we continued with the €1,500,000,000 share buyback program announced on the 28th June 2017 to be completed within 2 years. During 2017, we executed part of the program through a series of individual forward transactions unevenly distributed over the 2 year period as well as via open market transactions. Details about the transactions can be found on the Philips Investor Relations website. Let me now provide you with an update on the U. S. Health care markets and our outlook for Western Europe and China. The 4th quarter saw little resolution of the uncertainty in the U. S. Health care markets. Congress failed to pass the ACA Health Insurance Stabilization legislation. And while they did pass the Tax Cuts and Jobs Act, we expect that to have a mixed effect on the U. S. Health care market. The lower corporate taxes from the act will free up funds for capital equipment purchase. But at the same time, it included the repeal of the individual mandate, which is estimated to lead to 12,000,000 more uninsured Americans with corresponding uncompensated care costs for customers. Last week, the medical device excise tax was suspended for another 2 years, and we saw moderate improvement in government spending during the quarter. Given these uncertainties, we continue to expect U. S. Healthcare market growth to be in the low single digits while we closely monitor further developments. In Western Europe, we expect modest lowsingledigit Health Care market growth. And in China, we expect mid- to high single digit growth for 2018. Let me now provide some additional 2018 guidance for certain areas of our businesses. For HealthTech, Other and Legacy, we expect a net cost of approximately €50,000,000 in the first quarter and approximately €165,000,000 for the full year 2018, both at the EBITA level. Included in these numbers are €15,000,000 of restructuring and other incidental items for the Q1 and approximately €50,000,000 for the full year. Royalties are expected to be at a similar level compared to 2017. On an adjusted EBITA level, we expect full year costs at €115,000,000 which is an improvement of €42,000,000 mainly due to lower costs. The year on year EBITA improvement will be €52,000,000 Restructuring charges for the period 2017 to 2019 are still expected to be around 80 basis points on an average with a decrease thereafter. Overall, restructuring for 2018 is expected to be approximately 90 basis points, a 30 basis points decrease versus 2017. Acquisition related costs are expected to be approximately 40 basis points. As a consequence of the consent decree mainly related to our defibrillator business, we continue to anticipate an EBITA impact of approximately €60,000,000 in 2018, of which €20,000,000 in the Q1 of 2018. We evaluated our geographic mix. And combined with further optimization, we lowered our midterm effective tax rate guidance from around 30% to a 26% to 28% range, excluding incidentals. In summary, we continued to gain momentum in the 4th quarter with 7% comparable order intake growth, 5% comparable sales growth, 140 basis points earnings improvement and a strong cash flow performance. We delivered on our improvement targets for the year with a 4% comparable sales growth and adjusted EBITA margin increase of 110 basis points and a strong €1,200,000,000 free cash flow. For 2018, we are confident that we will deliver on our midterm targets of 4% to 6 percent comparable sales growth and on average an annual 100 basis points improvement in adjusted EBITDA and a free cash flow between €1,000,000,000 to €1,500,000,000 this year. Given the phasing of our order book, as Frans mentioned, we expect improvements to be at the back end of the year. With that, we'll now open the lines for your questions. Thank you. Thank We will now take our first question from Ms. Yi Dan Wang from Deutsche Bank. Please go ahead. Thank you very much. Yes, so just a quick question on the order intake in North America and why that has slowed down despite an easier comparison. And if I could tag on a financial one. In terms of the FX exposures, it would be helpful if you give us some sense of what your exposure in revenues is and also cost to key currencies. And that continues to be a source of negative surprises. And I think it will be good to tighten up consensus a bit on that. Yes. This is Frans. So overall order intake growth in North America was around 3% for the year. We spoke about some larger orders in Connected Care and Health Informatics not coming through in the 4th quarter, but now we expect these in the course of 2018 as decision making in U. S. Hospitals also given, let's say, uncertainty, is gets extra scrutiny. So overall, we feel that the market will continue to support our growth targets. I'm particularly pleased with the strong performance in Diagnostic and Treatment, where we saw double digit order growth for the full year 2017 in North America. That basically underlines the proof that we are recovering market share, Our innovations in diagnostic imaging, ultrasound and image guided therapy are very well received. I don't think that we have seen such strong order growth in D and T in North America for a long time. And we are really leaving behind us, let's say, the consequences of, let's say, Cleveland some years ago, and we are in a good mood. I also, in Davos, met several U. S. Health care providers that we now have many follow-up actions with as they are interested to having long term strategic partnerships to drive patient outcomes and productivity. For the ForEx, I will look to Abhijit on my right hand side to answer the question. Yes. I think for ForEx, as you've seen this year, we have not really called out any major impact. We don't expect a big impact next year. I think overall, for the U. S. Dollar, we are neutral. And then for emerging currencies, of course, we have hedging strategies in place but also pricing strategies with which we hope to cover. I think where it gets a bit tricky is when you compare, let's say, market estimates in absolute euro values to our actual performance, and then you see some people talking about missing or coming in lower. But that's so I think it's always good to look at comparable sales growth and EBITA margin. And when you look at the margins and comparable sales growth, then the FX exposure is taken out. Now if there are sudden switches, of course, that could lead to some impact. But overall, for the year, we think it will be negligible. Okay. If I could follow-up quickly on the FX and the North America order book. On the FX, would it be possible for you to provide a sensitivity table by major currency? We tend to get that for other medtech companies in the sector. So it will be really helpful if you can do that. And then on the order book, so given the double digit growth in order book in North America for D and T, Should we expect your growth so the absolute growth comparable growth you report in that part of the business starting to accelerate meaningfully through as we go through 2018? Or is the order book very sort of longer term so that we won't be able to see much of it in 2018, but it's more of a 2019, 2020 trend? Well, we will see the benefit of that order growth in the course of the year. In the speech, I said it will be back end loaded because typically, for larger capital equipment and certainly for the operating rooms for Image Guided Therapy, that takes quite a lot of planning also on the customer side. So I expect those orders to have an average throughput time to revenue of around 9 months. In any case, we just for your awareness as a new analyst, we only record orders that can be turned into revenue on average in 18 months. So we don't book long term orders as such. Maybe that's something that we should clarify for all the new people that follow the Philips stock. Yes. Regarding the FX sensitivity table, that's, of course, tricky because the exposure changes quarter to quarter depending on our supply pattern as well as the sales pattern. But maybe we can take that offline to see if there are a slightly higher level guidance that we could provide. But the sensitivity table is a moving table, so giving that output would not be wise at this time. But maybe good to take the opportunity, Abhijit, to talk a little bit about that. Let's say, we use currency comparable metrics to report on growth and all improvement targets. I think this morning, there was some confusion about did we miss or did we beat targets. With the dollar lower, obviously, nominal growth in euros is lower, but that's why we measure on a currency comparable basis, and we also do not include the acquisitions within the 12 month frame. So the 5% growth in the 4th quarter was real growth. And we actually are pretty pleased with that because it shows an increasing momentum. And we hope that also all the new analysts that maybe are more used to companies that report in U. S. Dollars understand, let's say, how we try to give transparency on a ForEx neutral basis on real underlying activity growth. Thank you. All right. Next question. The next question from Mr. Patrick Wood from Citi. Please state your question, sir. Thank you very much for taking my two questions. The first would be on the tax situation. Maybe you could give us some clues on what some of the offsets are. I know it's complex legislation, but the lack of effect for you guys relative to your exposure to the U. S. Is, I should say, somewhat in contrast to some of the other companies we cover. So I'm just curious as to what some of those offsets are that are making you confident that you're not going to get that tax gain? So that'd be the first question please. The second question would be really on the diagnosis and imaging side. It's been a while since we've seen the mid single digit growth and equally that as you pointed out, the D and T orders are very, very strong. Is that across all modalities particularly in the D and T order book? I know you called out ultrasound in general, but I'm just curious, are you seeing that strength across the board because it's a very large number? And within that, is there any one off large order that would be boosting that? Or is it just taking share back really? Thank you. All right. Let me Patrick, let me take the second question first and then defer to Abhijit. The order growth is across all modalities. We see strong traction in ultrasound, in diagnostic imaging as well as in with the Azurion platform. Therefore, is expected to continue. Over to you, Ujjit. Yes. Patrick, as you said, the tax thing is complex. So I'm not going to give you a lecture on it now. But from a high level, there are a couple of things. In the U. S, we had, of course, profits there, but we were able to offset our interest on intercompany loans as a deductible, which therefore got our effective tax rate to similar levels that we will have it post the new legislation. You are also aware of the BEAT tax that has been imposed. So therefore, in the short term, as our profits are still low, that has a negative impact. As it grows, as our performance in the U. S. Increases over time, we will start seeing some benefits. But in the short term, not much. And as I mentioned, unrelated to this, we have brought down our overall tax guidance to the 26% to 28% range. Thank you very much guys for the details. Really appreciate it. Thank you. The next question comes from Veronika Dubajova from Goldman Sachs. Please take your question, madam. Good morning, gentlemen, and thank you for taking my questions. I'd like to start off with Cleveland tonight. I noticed in the press release you said you had a constructive meeting with the FDA. Can you maybe give us a little bit more detail on what you define as constructive meeting? And to the extent that we need to worry about further enforcement action to the FDA. Can you put our mind at rest on that? And then I have a quick follow-up on the tax, but maybe I'll ask that after Cleveland. Yes. Hi, Veronika. I think we can put your mind at rest. I know it occupies many mines. So if I reframe it, we had the inspection, then the findings were disclosed. Also thanks to your efforts to get it on the table. I always said then we need to have a conversation with the FDA. That took place in December. We actually saw that we were commended for progress in many areas, while we also still have room for further improvement. And we concluded the meeting to with the agreement to keep each other informed about further progress, and we can expect in due course another inspection. But that, I would say, is pretty much business as usual. So as long as we keep improving, then I think we are in good standing with regards to our diagnostic imaging facility in Cleveland. So it's fair to say you wouldn't expect any further enforcement action at this stage? That's correct. Okay. Thank you. Can I quickly ask Abhijit on the tax rate? I appreciate thank you for the medium term guidance. That's very helpful. But if I look at your business, I can actually with the exception of 2015 where there were some one offs, I cannot find a time when you were paying a 30% frankly even a 26% tax rate, right? This past year you paid 25%. So as I look at my 2018 forecast, what should be the tax rate that we're using? Is it 26% or is it 25% or what's the appropriate number, I guess, for the very short term as we look at our 2018 2019 forecast? Annika, if you look at the past years, it's almost impossible to give you a clean rate because we get, of course, we gain sometimes deferred tax assets. There are uncertain tax positions, which over a period of time, when there is no further follow-up from tax authorities, those provisions get released. So you can't bank on that for the future. I mean those things come when they come. So therefore, we give a range of 26 to 18 26 to 28. And your guess at this stage is probably as good as ours. So we would be in that range. If we still have uncertain tax position releases, we could come a bit lower. But it's almost impossible for to guide to that. We only know that during the year as the various hearings proceed. Okay. Okay. Thank you both very much. We will now take our next question from Ian Douglas Pennis from UBS. Please state your question. Hi, yes. Thank you very much. So and I'm sorry to labor the point, but just a quick question on tax. Can I just confirm your 2018 tax guidance is also 26% to 28% as well as the medium term? Yes. Sorry. That's correct. Is that just a yes? That's a yes. Perfect. So and then on guidance, you're saying this year is going to be H2 weighted and 2017 was also H2 weighted in terms of how the growth came through. So this seems like the comps in the second half would be quite tough. What gives you that confidence that, that large amount of orders will come through in the second half? And also, given you've had relatively strong order growth for most of 2017, why should we not see a kind of a bolus of sales coming through in the first half of twenty eighteen? And my last question on Cleveland. Obviously, you gave us some good news there. Could you just give us some commentary on your efforts for improving quality control processes across the Phillips Group rather than just focused in on the 2 facilities that get a lot of attention at the moment? Yes. Ian, Yes, so the tax is already confirmed. The guidance for the second half is actually based also on analyzing our order book and the order book composition as it is, let's say, strongly related to the D and T portfolio, which is more capital equipment, then we see that the throughput time to realize that or turn that into revenue after sign off by the customers, a 9 month throughput time is pretty normal. So that means that all that good all those good orders will turn into revenue in the second half of the year, unfortunately not in Q1 or in Q2. Of course, we also have book and bill business that will still help the first half. But despite the tougher comparison, we maintain a similar pattern of back end loadedness. Then on quality and controls, this has been a focal point ever since, let's say, the wake up call in 2014 where we were where I was confronted with Cleveland, and we intervened in the health care sector. We replaced management. We stepped up global leadership in quality and regulatory compliance. We started to improve our IT systems to track and measure quality controls. You need to imagine that quality compliance involves hundreds of thousands of records. And previously, we discussed that often our issues with the FDA were related to the documentary evidence on quality controls. And since that there is this huge volume in the handling of supplies and controls, supplier controls and field returns or field interventions, than automation and standardization of processes helped tremendously. So a combination of different people, much more rigor and improved quality culture, stronger procedures and IT support help us get a handle on this. We have a couple of 100 inspections per year across the globe, not only from the FDA but also from German to China as FDA and so on and so on. And the trend line on all these inspections have been very good. In fact, we did not get new warning letters in that period, right? And we also measure major versus minor observations, and we see a very good trend there, all right? So overall, I feel confident that the various locations across the world, we have made very good progress. And in fact, we also heard that from the FDA in our dialogues with them that we are making progress. Unfortunately, you still have, let's say, the legacy that chases you. I mean, legacy is, for example, in relation to the consent decree, which dates back from the period of 2013, 2015. Now we are now demonstrating with the external inspections as part of the consent decree that our quality management system is in much better shape. And when we reported in the call earlier that we are tracking according to plan, that also means that I feel confident that we are, let's say, maintaining our schedule to also resume the U. S. Production, let's say, in the Q3 as previously guided for. Maybe, Ian, just to add one more point regarding the seasonality of sales. I think it's important to note that earlier, we had a hump in Q1 because of Chinese New Year for our consumer businesses. We see that more and more getting evenly spread through the year because there are special promotions that happen online like the 11:11 Singles Day in China in November. That's where a lot of the buying takes place because there are heavy online deals which are available. Certain big platforms like jd.com, etcetera, have stuff that happens during the middle of the year. So that particular sensitivity to high Chinese New Year sales also, we expect next year to be more neutralized. This year. This year, sorry, 2018, yes. Sure. Understood. Sorry, just can I just do one word follow-up? If North is where you were the day before the Cleveland thing in 2014 and 100 is where you want to be, where are we today? Not being 0, right? I mean this is your Yes. Sorry, it's not being my English. If you want to give me a self assessment on where we are, this is difficult because I'm as a Dutch person, I don't usually give high grades. So now I'm in a bind. Shall I give myself a high grade? I don't think I will do that because there's always room for improvement. The first thing I need to tell you, however, is that please do not equate the business group Diagnostic Imaging solely with Cleveland. We have been derisking Diagnostic Imaging tremendously. And I think Veronika observed that in her note somewhere back in the fall that, in fact, what remains in Cleveland is not very big. We are very strong now in Haifa in Israel, in BEST in the Netherlands and in Suzhou in China. Those are the 3 main locations for the future. And the quality management system in those locations is definitely very, very strong. So 7, 8 score, given my conservatism as a Dutchman. And as we talked about the constructive dialogue, there is still further room for improvement in Cleveland, but it is no longer that high risk factor that was on everybody's mind in the past. And that is why we called it constructive, and that is also why I said we are back into a normal mode where maybe we will get an annual inspection. But that's it. I hope that's helpful. Very helpful. Thank you. I'll leave it there. We will take our next question from Mr. Scott Bardo from Berenberg. Yes, good morning and thanks very much for taking my question. So as we look at fiscal 2017, I think you grew for the full year at 3.9%. So just a shade below the lower end of your 4% to 6% guidance, albeit not much. So I just wondered if you could give a little bit more details as to why revenues weren't more suddenly in the bandwidth this year? What was the principal drivers? And also talk about 2018, what will be the major segments, if you like, driving growth more suddenly in the bandwidth? Also, just with respect to the derisking strategy that you referred to, which is ongoing, is it still the plan to transfer production and get approval of the Ingenuity line of CT scanners? And perhaps you can give some sense of when that will likely happen? Last question, please. Just relates to the North American relocation of your headquarters to Cambridge. It seems like quite a major relocation exercise. Just wondered if you could give us a little bit of background as to why you do that and what the advantages are. Thank you. Great. Actually, I'm happy with that first question because the core business in Philips, so I. E, the sum of the 3 segments, grew 4.3% in 2017, offset by a decline in Philips Other, right, which is basically part of the license income, some of the remains of the consumer electronics license income that we still carry with us or at the group level. So 4.3% is what I think everybody needs to keep in mind as the foundational growth of our current HealthStack portfolio. And of course, we have every intention to continue that momentum. And if you then see that order growth was north of that, that also, I think, gives some evidence and confidence on that statement. So full year 2018, I think we have momentum as a company. Customers and consumers like our product ranges. We have introduced a slate of new innovations. The D and T portfolio was 60% renewed. The Diagnostic Imaging within that even 70%. We also believe that the CCHI slowness at the back end of the year last year is more a blip than a trend. We saw some orders being pushed out. But if you also dissect the CCHI business, then actually, we gained market share in patient monitoring. We saw, of course, a decline in therapeutic care in relation to the defibrillator business, but that was known. I mean, we all have talked about the defibrillator business that, that would cause a decline for, let's say, a 9 to 12 months period. But if you take that out of the CCHI portfolio, then actually, performance is much better. On the question of the remaining products in Cleveland, so you're well informed. We have already transferred almost all products except for that last one. That is what we are working on. Today is not the moment to give further details about that, but I would say stay tuned. And then on Cambridge, yes, I must say in the press, it became a headquarter message. But in fact, it is primarily an R and D relocation. It's also our notional headquarters, but the management of Philips North America actually sits all over the country with locations as Seattle, Pittsburgh, San Diego and of course, then Boston. The main activities in Cambridge will be R and D related. We are we want to establish ourselves stronger there given the talent pool that we see with, for example, MIT. 2 years ago, we moved up our research facility from the New York State into Cambridge. That's about 300 people or so. That has worked out very well. We see the talent attraction, the collaboration with MIT working very well, hospitals and so on. So we are going to move most of our R and D personnel from Andover to Cambridge in by the Q2 or Q1 of 2020. This will be a facility that is under construction currently that we will, for the large part, lease. I mean we take most of the building. That's what I mean. And we are very excited about being in that ecosystem in Cambridge. Very good. Just one quick clarification, please. And also, does that encapsulate any R and D personnel and training personnel at Cleveland as well? Is that your expectation? That is not part of the transfer and announcement, no. The next question comes from Mr. David Adlington from JPMorgan. Please state your question, sir. Hey, guys. A couple of clarifications and just follow-up. So in your remarks, you mentioned on HealthTech and other, which I think came in a bit below most people's expectations that you mentioned an issue around a licensee. Was that a licensee who did not renew? And if not, why not? And secondly, just in terms of the defibrillator headwind, is that included or excluded from the 100 basis points of margin expansion this year? You want to go? Yes. I think on the license, one, we have negotiations with many, many potential licensees. And sometimes, they end on time, and litigate to get our license revenue. And in this one case, we haven't yet reached an agreement. And hopefully, we get to an agreement in 2018 or if not, probably could take longer if it goes into litigation. So I would not like But maybe Jason doesn't know the background that most of our license or let's say, a big part of our license income relates to patents on consumer electronics portfolios. And some of those patents are running out. And that's why over the last few years, we had a gradually declining license income. We are currently more seeing a flattening of that outlook. So we do not expect further deteriorations in the license income in the coming years. So we have most of that decline behind us. And then as Abhijit says, it is sometimes a lumpy business because you need to negotiate. So it is not always predictable in which quarter you will get an upside or not. And then the second question, Abhijit? Yes. On the BPHIPS, yes, that is part of the normal business. So all the costs sit there. The only cost that we had guided to was the €20,000,000 for this year and the €60,000,000 next year. Q1 2020. Yes, yes. Sorry, for 2018, we guided to €60,000,000 for the full year, of which €20,000,000 in the first quarter, that is adjusted out. So that is related to cost specific to the consent decree. But for the rest, the normal business is all part of the improvement. Understood. Thank you. The next question comes from Mr. Max Yates from Credit Suisse. Please state your question, sir. Hi, thank you. Just two questions. So I just wanted to go back to a comment you made on the last call about I think you were saying that acquisitions would have a sort of 20 to 30 basis point impact on margins. And I presume because of where the acquisitions have gone into D and T, most of that was in the Diagnosis and Treatment division. So I just wanted to sort of understand a little bit, is that the case? And did that impact D and T margins this quarter? And if that is the case, then the underlying performance must have been sort of very strong in that division. So can we think about kind of the margins that the underlying business are generating having improved? And what's driving that? Is that the new product? Is that just volume in the factories? And if you could comment a little bit about the evolution of that margin? That's Max, that's a correct observation. I mean we exclude from the results the post merger integration costs. But obviously, the operational results of the acquisitions are part of the adjusted EBITDA as we reported. Some of the acquisitions are early stage, and they still have a negative EBITDA. Others, of course, like Volcano, are doing very well. But overall, the impact was indeed around 20 basis points. And that was both in the D and T and in the CCHI portfolios. The underlying strength of the profit improvement has to do, on the one hand, with the innovations that we are that we have launched, innovations that have higher gross margin and higher growth. Secondly, of course, everybody benefits from the productivity programs that we run with benefits being spread more or less equally across the businesses. And then D and T in particular is benefiting from the market share gains and recovery in Diagnostic Imaging, where we are also taking cost and productivity measures on top of the overall company measures. Then I think a special mention is deserved for ultrasound. Philips is the market leader in cardiovascular ultrasound, and we have taken a conscious decision to spread our wings also in general imaging and OBGYN. For that, we have been developing new products over the last 2.5, 3 years. Those products have come into the market in 2017, start gaining really high traction in order growth, and that will translate itself in higher revenue growth in 2018. Just to quantify that, we saw in the Q4 high teens order intake growth in ultrasound and double digit for the whole year. Now ultrasound is for us a very high profit business. So as ultrasound is getting at a higher clip growing at a higher clip, that will also improve further the profit mix for D and T, but in fact, for the whole company because it is significantly above the average of Philips. Okay. Just one follow-up. Obviously, we're getting quite a lot of disclosure from one of your peers around the IPO of that business. One that stood out, I think, from their Capital Markets Day was their advanced therapies business. Obviously, it looks sort of somewhat similar to your IGT business, but without the devices that you've acquired. They showed that they were doing a 22% margin in that Advanced Therapies business. So it looks like from what we know about your IGT business previously, even before acquiring Volcano and SpectorNetrix, it was quite a lot lower margin than that. So could you kind of help us a little bit with why you think that is and whether we're sort of comparing like with like? So your IGT business, ex devices, how does that look from a product standpoint versus their business? And is there any reason those 2 should be different margin or materially different margins? Well, prior to the adjacency into devices, our Image Guided Therapy business was in the high teens. And we have stepped up R and D in that business towards to launch the Azurion platform, to get into the adjacencies of the hybrid operating room, adding all the software for guidance of the therapies and to work on innovations that leverage the device businesses. We have every conviction that the combined IGT business, so systems and devices, will get to around 20% EBITA by 2020, so that's kind of 2020 20, and a total size of around €3,000,000,000 in revenue, which is twothree systems and onethree devices, I would even volunteer that it doesn't stop in 2020, and it has further room to improve thereafter given the potential in that business. Now having said all that, look, our Eastern neighbors are ahead of us in terms of profitability in the D and T cluster, although I think we are ahead in ultrasound. But we definitely challenge ourselves to emulate that kind of profitability. And therefore, as a stock, Philips has upside to go, right? We and we are demonstrating with an annual improvement of at least 100 bps and actually more so in D and T that we're also delivering on closing that gap. Okay. Maybe just a sort of one word. On the Image Guided Therapy business all in with devices and systems, could you just give us where margins are today relative to that 20% that you talk about in 2020? Yes. We are in the teams there, but we don't give, let's say, more specific than that. So we are, let's say, low teams, I guess. We are well enough in the teens that I can achieve the 20% by 2020. Obviously, if we were to be in the low teens, that would not be possible. Okay. Very helpful. Thank you. Clarity there. The next question comes from Mr. David Voss from Barclays. Please state your question, sir. Thanks gentlemen for taking my question. Just one on Personal Health actually. Clearly, OneBlade has been a phenomenal commercial success. I was curious to know how many of those type of projects or products indeed you have in the portfolio, I. E. Many products do get to €100,000,000 of sales in sort of short period of time? And then clearly also, what is the runway you see for 1 blade? Can I go to €500,000,000 over a few years? Just can you help us scale that opportunity? Thank you. Yes. Let me first give a general remark. So obviously, we like businesses that have recurring revenues attached to them. And several of our businesses do in Personal Health, Sleep and Respiratory Care, where you have services and masks oral care where we have brush heads and then shaving where we have shaver heads. OneBlade is as a hybrid shaver between wet and dry shaving and has a targeted renewal replacement rate of 3 to 4 blades a year. Currently, we are tracking off the top of my head at 2.5 blade per handle per year. So as we are expanding the market penetration, The blade business is growing and of course, comes with very nice margins. The €100,000,000 in 18 months is for a new category is quite exceptional. For an existing category, it is quite normal. So when we launch new SonyCare power toothbrushes, you typically you get to these kind of fast ramp ups for a single product. So that is quite normal. Now your question on can we forecast how far one blade will go, we think it has a lot of runway. We have not quantified that runway. But if it continues at this clip, then it will more than offset, let's say, the more the slow growth in the more traditional electric shaving market, which for some years has been more of a stagnant category. And so overall then, we are seeing nice growth in the Personal Care business. Thank you very much. The next question comes from Juliet Dormois from Exane. Please go ahead. Hi, good morning, gentlemen. I'm left with 2 questions. The first one is I'm trying to reconcile your comments, especially because you've just recorded one of the strongest order intake in the D and T business for some time in the U. S. But at the same time, you are guiding to uncertainty starting in 2018. So is it because you had a very strong orders from hospitals ahead of the abandon of the mandatory coverage from Obamacare in 2018? Or is it just another example of just Dutchman conservatism as you highlighted before? And the second question is just a housekeeping one regarding the guidance. You have said that you expect improvements in the course of the year, actually in back half of twenty eighteen. I was just wondering, I understood that it clearly relates to organic growth accelerating in the course of 2018, but that also implied that the margin gains will also be stronger in H2 than in H1? Is that right? Well, let's first talk about the uncertainty that we see in the U. S. Market. That comment covers all our businesses, not just D and T, right? So in Personal Health, we saw somewhat slower growth. In CCHI, we already talked about the postponement of some big orders. And let's say, the increased carefulness of large hospital providers or care providers to engage given the uncertainty in the reimbursement T segment has just done very well, taking orders and market share. We, of course, are keen to continue to outgrow the market. And so you should see the statement of uncertainty more as a generic market assessment. Also, to offset a little bit of the euphoria around the world economy, right? What we see that governments do across the world is trying to contain Health Care budget growth as they see aging population, more chronic disease. And they don't want to see that those budgets to continue to grow so fast. And that is, I think, where some uncertainty should be recognized. Then on the second question, maybe I'll let Abhijit answer that. Yes. I think what you said is right. We expect both sales growth and therefore related margin growth to be more back end loaded. It's similar to the pattern we had this year. So we had strong margin growth in Q3 and Q4. So that helped us to get to the 110 bps for the year. We expect a similar trend next year as well. Okay. That's very helpful. Thank you. The next question comes from James Moore from Redburn. Please state your question, sir. Yes, good morning, everyone, Franz, Abhijit. I've got three questions, if I could. Could you talk about the margin uplift in D and T for the full year of 2017? Was it similar across DI Ultra and IGT? Or was there any kind of ranking of progression that you could give us? And also within D and T, can you talk about whether the service margin is relatively stable and all the upside is coming from equipment or whether both sides are moving? That's the first question. And then secondly, could you comment on any progressions of market shares in orders from ultrasound to MR and CT? I get the sense that ultrasound must have moved forward. But are they all moving forward? Are there any differences by regions? And then finally, on the seasonality comment, I mean, I go back over the last decade, sometimes you say it, sometimes you don't. In the last 4 years, you've done between 66%, 67% of full year adjusted EBITA every year. Does that decision to comment on the back end mean that this year we'll see even more than 66%, 67% of the profit in the second half or the usual? Okay. Let me take them 1 by 1. So if you look at D and T, the margin improvements are coming largely across the board. I would say the biggest part of the margin improvement comes in DI, followed by IGT. And in Ultrasound, actually, we are the value creation story around ultrasound, it's a high margin business. So we are pushing there for growth and not so much the margin improvement because at the levels that we are, the overall cash generation from that business will grow as we grow the size of the business. So highest in DI, 2nd in IGT and then slightly less in ultrasound. Service margins are, by and large, stable. So basically, we are the cost reductions and the operating leverage is coming from the growth that we are generating as well as the cost that we are taking out. The footprint reductions, etcetera, are impacting more the equipment profitability. The progression in market share actually is across modalities. So as Frans mentioned, although it's double digit growth for D and T, it's high single to very high double digit across the modality. So it's not that there is a modality which is in the low or mid single digit. They are all growing extremely well. And I think one of the key drivers there is the renewal of the portfolio. So in DI alone, about 70% of the portfolio is renewed over the last 1.5 years and about 60% for the whole of D and T. T. And that is, of course, driving the market share growth that we are seeing as well, which is a, from our current estimates, about a 60 basis points increase in market share. Now on the seasonality, the profit that we make through the year is more second half weighted. But what we are telling you is that the year on year improvement will be more in the second half than in the first half. So the overall rating for the year remains, but the improvement is more in the second half than in the first half. Like in the Q4, we had 140 basis points profit improvement in Q4 and slightly below the 100 basis points in the first half of the year. Exactly. Great answers. Thanks, Chaps. We have a follow-up question from Ms. Yi Dan Wang from Deutsche Bank. Please state your question. Okay. Thank you. Sorry. Two quick ones. Sorry. You're not audible. Yes, sorry, I was on a headset, just got rid of that one. Yes, so 2 very quick ones. The one off cost for the quarter was much lower than expected. Just wondering what the reason for that is. Is it just cost that's being delayed? Or have you, for some reason, decided not to continue with those programs? And then secondly, on the financial costs, that also ends up being much lower than consensus expected. Can you give us some guidance for 2018? That would be great. On the one off costs, there are a couple of reasons. So one is the post merger integration costs of Spectrolytics was lower than we had anticipated. So we have been tied in that, especially related to IT costs, where we have much more efficient ways of integrating than we had planned earlier. The second part is a particular program has moved over to Q1. So it's not that we are abandoning any cost reduction, but it is linked to announcements. And there are certain rules by which you can book those provisions. So that has moved to Q1. We've also mentioned in the press release that we had a bit of a release of certain provisions related to legal cases that we had booked earlier that went our way. So that was also a bit of good fortune. And last but not the least, on financial income and expenses, we did get a dividend payout from Lumilez, which was not planned, and that helped to reduce the number for Q4. But overall, from an interest expense point of view, we expect next year to be flat for to this year. So this year, we had a big reduction, over GBP 100,000,000 in the year on our interest cost. And now we expect that to flatten for next year. Okay. And the Luminate dividend, do you expect some of that next year? Is that so uncertain that we should just leave it for now? Yes. That depends on how Luminate is performing and how their cash situation is. But I think that is something we will update you when it happens. Okay. And then on the one off costs, how much of the one off cost is moving to Q1 2018? We have guided specifically for Q1 2018 in the press release. So you have a specific Thank you, Mr Thank you, Mr. Van Aerten. And Mr. Bhattacharya, that was the last question. Please continue. Okay. Well, thanks everybody for a great session. I think it's very important that we get all the questions, and we'll try to answer them as detailed as possible so to get your understanding up. We welcome all the new analysts as part of our community. Feel free to contact Finn Preysmann and his team of Investor Relations later today or throughout the week as more questions come up because we value the correct understanding of our results. Let me end on a note that we feel very confident and positive about the trajectory that we are on, the order growth that we are seeing, the innovations that are well in demand by our customers. We also believe that we have behind us all the difficult transformation that some of our competitors still needs to go through. So we are going to benefit from that focus. And I think customers recognize that we have made our choices. With that, I'd like to close the call. Thank you very much, and have a